Dublin Corporation v McAdam (Surveyor of Taxes)

• Jurisdiction: Ireland
• Date: 1883
• Court: Court of Appeal (Ireland)

NO. 104.-EXCHEQUER DIVISION (IRELAND).

(t) DUBLIN CORPORATION

and

M'ADAM (Surveyor of Taxes)

Income Tax.-Profits.-A city corporation is empowered by its Waterworks Act to supply water beyond the city boundaries.-Any income thus arising must be paid into a consolidated fund available for all the purposes of the Act.

Held, That the excess of receipts over expenditure in respect of the extra-municipal supply constitutes "Profit" chargeable with Income Tax.

1. At a meeting of the Commissioners for the special purposes of the Income Tax Acts, held at Dublin, on the 25th November, 1884, the Rt. Hon. the Lord Mayor, Aldermen, and Burgesses of Dublin, appealed against the assessments made upon them under Sch. D. of the Income Tax Acts for the years ending April 5th, 1884, and April 5th, 1885, in respect of the annual value of certain waterworks belonging to them.

2. By the Dublin Corporation Waterworks Act, 1861 (24 & 25 Vict. c. clxxii., Loc. and Pers.), and other Acts amending the same, the Rt. Hon. the Lord Mayor, Aldermen, Burgesses of Dublin (therein-after called the Corporation) were empowered to construct works for supplying water to the borough of Dublin and its vicinity, and to other townships and places in the Act mentioned, outside the municipal area.

3. For the purposes of the Act, the Corporation are authorised to borrow money on mortgage, and otherwise, on the security of the rates leviable under the Act.

4. To meet the payments to which the Corporation are liable in respect of the purposes of the Act, the Corporation are empowered to order the levy of a rate to be called the "domestic water rate" upon the occupiers of all houses within the borough of Dublin. They are also empowered to levy a further rate, called the "public water rate," which is to be paid by the owners of all rateable property within the said borough, for the purposes of providing a supply of water for better security against fire, for

flushing sewers, for public baths and wash-houses, for drinking fountains, and for sanitary uses within the said borough. A rate or rent may also be charged by them for water supplied for domestic purposes to houses and premises in extra-municipal districts.

5. The Corporation are also authorised to contract with any person for the supply of water for other than domestic purposes upon terms to be agreed on. And the rent or rates charged constitute a rate called the "contract water rate"; and the Corporation are empowered to contract with parties or persons residing outside the municipal or extra-municipal area for a supply of water on like terms.

6. By section 72 of the above-mentioned Act of 1861, the Corporation are directed to apply the proceeds arising to them under that Act to the purposes of that Act, and the Acts recited therein.

7. By section 16 of the Dublin Waterworks Act, 1870 (33 & 34 Vict. c. xcvi.), it is enacted that after certain arrangements with regard to the conversion into terminable annuities of a loan raised by the Corporation for construction of their waterworks have taken effect, "the income derived from or to be derived "from the extra-municipal district, or from any other districts "outside the city, and not included in the extra-municipal, shall, "after such consolidation, be dealt with in all respects as a contract "rate in the same manner as if it were a contract rate payable "within the municipal districts; and the said income, consolidated "with the city rates and contract rate, shall form one "consolidated fund, which consolidated fund shall be available "for the payment of the interest and principal of the loans raised "upon the security of the city rates, and of the loans raised upon "the security of the extra-municipal incomes; and the said consolidated "fund or waterworks fund shall be one fund, and be "applicable to all the purposes of the said last-mentioned Act, "and the Acts of 1861, 1863, and 1866, incorporated therewith."

8. The duties for income tax for the year 1883-4 were granted by the Customs and Inland Revenue Act, 1883 (46 Vict. c. 10), and for the year 1884-5 by the Customs and Inland Revenue Act, 1884 (47 & 48 Vict. c. 25). By these Acts all the provisions for charging and levying the income tax contained in the previous statutes were continued in force.

9. The rules for assessing and charging the several duties are contained chiefly in the 5 & 6 Vict. c. 35. By section 40 of that Act it is enacted that all corporations, companies, or societies, whether corporate or not corporate, shall be charged with the duties, and the chamberlain or other officer acting as treasurer shall be answerable for doing all such things as are required by the Act to be done in order to assessment.

10. The waterworks of the appellants are charged and assessed to the duties in the manner directed in Schedule A., No. 3 of the Act 5 & 6 Vict. c. 35, and under the 8th section of 29 Vict. c. 36, according to the rules prescribed by Schedule D. of the first Act, so far as such rules are consistent with the said No. 3. The provisions of the said Schedule A., No. 3, so far as material, are as follows:-"The annual value of all the properties herein-after "described shall be understood to be the full amount for one "year, or the average amount for one year of the profits received "therefrom, within the respective times herein limited: 1, of "quarries of stone, slate, limestone, or chalk, on the amount of "profits in the preceding year; 2, of mines of coal, tin, lead, "copper, mundic, iron, and other mines, on an average of the "five preceding years, subject to the provisions concerning mines "contained in this Act; 3, of iron works, gas works, salt springs "or works, alum mines or works, waterworks, streams of water, "canals, inland navigations, docks, drains, and levels, fishings, "rights of markets and fairs, tolls, railways, and other ways, "bridges, ferries, and other concerns of the like nature, from or "arising out of any lands, tenements, hereditaments, or heritages, "on the profits of the year preceding. The duty in each of the "last three rules to be charged on the person, corporation, company, "or society of persons, whether corporate or not corporate, "carrying on the concern, or on their respective agents, "treasurers, or other officers having the direction or management "thereof, or being in the receipt of the profits thereof, on "the amount of the produce or value thereof, and before paying, "rendering, or distributing the produce or the value, either "between the different persons or members of the corporation, "company, or society engaged in the concern, or to the owner "of the soil or property, or to any creditor or other person whatever "having a claim on or out of the said profits; and all such "persons, corporations, companies, and societies, respectively, "shall allow out of such produce or value a proportionate deduction "of the duty so charged; and the said charge shall "be made on the said profits exclusively of any lands used or "occupied in or about the concern."

11. For the year ending April 5th, 1884, the Corporation were assessed on a sum of 24,957l.; and for the year ending April 5th, 1885, on a sum of 23,869l. 14s. 4d., these sums being the net profits derived by the Corporation from the said waterworks in the years 1882 and 1883, respectively, as calculated from the printed accounts of the Corporation for the years named.

12. The profits assessed included the income derived by the Corporation from rates levied by them within the municipal area, and from the sale of water within and without such area.

13. At the hearing of the appeal, the respondent applied that the assessment might be amended by the excluding therefrom the income derived from rates, and that the Corporation should be charged with duty on the income derived by them from the supply of water outside the limits of compulsory supply, and from the supply of water within those limits for purposes of trade, manufacture, and otherwise, after allowing therefrom a deduction of a proportionate part of the expenses.

14. On the part of the Corporation, it was contended:-

1. (1.) That the revenue derived by them from the contract water rate, and from the supply of water to the extra-municipal districts, does not constitute "property" or "profits" within the meaning of the Income Tax Acts.

2. (2.) That, by the 33 & 34 Vict. c. xcvi., s. 16 (Loc. and Pers.), the income derived by the Corporation from the extra-municipal districts is consolidated with the city water rate and contract water rate; and that this consolidated fund is made available for the payment of the principal and interest of the several waterworks loans, and for all the purposes of the Waterworks Acts; and that, consequently, no distinction can be drawn between the city water rates and contract and extra-municipal water rates as to the right to exemption from income tax.

3. (3.) That in the years in respect of which the assessment has been made, no surplus revenue was in fact derived by the Corporation from the contract and extra-municipal water rates, after discharging the liabilities to which those rates were subject by statute. And the Corporation also submitted a summary of account in support of their contention.

15. It was submitted, on the part of the respondent, that the appellants were liable to be assessed in respect of the full annual value or profits arising from the supply or sale of water in the extra-municipal area, and from the supply or sale of water for special and manufacturing purposes within the municipal area; and also in respect of the interest and rents paid out of the revenue derived from the waterworks.

16. The Commissioners reserved their decision, and afterwards, on investigation of the accounts furnished, found that the income of the Corporation, in respect of the waterworks in question, was derived from the several under-mentioned sources:-

1. (a.) Domestic water rate, leviable throughout the municipal area.

2. ...